TMI Blog1973 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is entitled to the deduction of a sum of Rs. 2,30,546 by way of brokerage commission? (2) Whether, on a true construction of section 5(1)(viii) and 5(1)(xv) of the Wealth-tax Act, the assessee is entitled to the exclusion of the value of jewellery amounting to Rs. 27,27,330 from the computation of his total wealth ? (3) Whether any part of the amount of Rs. 36,87,419 fixed as compensation payable to the assessee under the Bihar Land Reforms Act is liable for inclusion in the total wealth of the assessee ? The assessee was the former Maharajadhiraja of Darbhanga. The matter relates to the assessment year 1957-58, the relevant valuation date for which was March 31, 1957. The assessee filed a return on April 22, 1958, declaring a net wealth of Rs. 2,77,46,489. A revised return was filed subsequently showing the total wealth to be Rs. 2,69,58,130. The Wealth-tax officer determined the net wealth of the assessee to be Rs. 4,57,85,996. The assessee held shares and stocks in various limited companies. In the return filed by him the assessee gave correct valuation of those shares and stocks as given in the stock exchange quotations and the quotations furnished by well-kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the statute book, that clause governed the exemptions granted by section 5 in preference to clause (viii). The Tribunal consequently rejected the claim of the assessee in respect of the jewellery. As regards the compensation payable under the Bihar Land Reforms Act to the assessee, a contention was raised on behalf of the assessee that the market value of the compensation bonds was about 50 per cent. of its face value. The Tribunal observed in this connection that the value was generally estimated at 65 per cent. of the amount of compensation determined by the Compensation Officer. It was accordingly held that the valuation of the bonds should be determined to be 65 per cent. of the face value The questions reproduced above were thereafter referred to the High Court at the instance of the assessee. The High Court, while dealing with the first question, observed that in estimating the value of an asset, regard must be had to the value it would fetch. The word "fetch", in the opinion of the High Court, must mean the quoted price only and brokerage and other inevitable expenses would have to be ignored. On question No. (2), the High Court expressed the opinion that the jewelle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. We find it difficult to accede to this contention. The matter is rather old as it relates to the assessment year 1957-58. The case of the assessee before the Wealth-tax Officer was that the entire jewellery worth Rs. 27,27,330 was intended for his personal use and should not be included in the total wealth. The Wealth-tax Officer disallowed the claim of the assessee in this respect on the ground that the items of jewellery were covered by clause (xv) and not by clause (viii) of section 5(1) of the Act. The claim of the assessee that the jewellery in question was intended for the personal use of the assessee was not rejected. No plea was also raised in appeal before the Appellate Assistant Commissioner or the Tribunal that the jewellery was not intended for the personal use of the assessee. It, therefore, cannot be said on the record that the claim of the assessee that the jewellery in question was intended for his personal use has been controverted. In the circumstances, we must proceed on the assumption for the purpose of the assessment during the relevant year that the jewellery was intended for the personal use of the assessee. It may be mentioned that jewel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich they would fetch if sold in the open market on the valuation date. The authorities concerned under the Act for this purpose accepted the valuation as given in stock exchange quotations and the quotations furnished by well-known brokers. No objection can be taken to this mode of valuation. Indeed, this was the mode which had been adopted by the assessee himself in the return filed by him. There is nothing in the language of section 7(1) of the Act which permits any deduction on account of the expenses of sale which may be borne by the assessee if he were to sell the asset in question in the open market. The value according to section 7(1) has to be the price which the asset would fetch if sold in the open market. In a good many cases, the amount which the vendor would receive would be less than the price fetched by the asset. The vendor may, for example, have to pay for the brokerage commission or may have to incur other expenses for effectuating the sale. It is not, however, the amount which the vendor would receive after deduction of those expenses but the price which the asset would fetch when sold in the open market as would constitute the value of the asset for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lows a deduction up to 5 per cent. on account of expenses for administering or realising property situated out of India in computing the value of that property. It would follow from the above that where the legislature intended that allowance or deduction should be made from the value of property, it made an express provision to that effect. The fact that no provision was made in respect of expenses which may have to be borne by the assessee in effecting the sale of an asset shows that in computing the value of an asset, such expenses cannot be deducted from the price which the asset would fetch if sold in the open market. Section 36(1) of the Estate Duty Act was based upon section 7(5) of U. K. Finance Act, 1894, and section 60(2) of the U. K. Finance Act, 1910, while section 48 of the Estate Duty Act was based upon section 7(3) of the U. K. Finance Act, 1894. According to section 7(5) of the U. K. Finance Act, 1894 : "The principal value of any property shall be estimated to be the price which, in the opinion of the Commissioners, such property would fetch if sold in the open market at the time of the death of the deceased. Section 60(2) of the U. K. Finance Act, 1910, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the statute must be followed." Similar observations were made by Lord Hodson and Lord Guest. We are, therefore, of the view that the High Court rightly answered question No. (1) relating to the claim for deduction on account of brokerage commission against the assessee. Question No. (3) pertains to the compensation payable to the assessee under the Bihar Land Reforms Act. Two contentions have been advanced on behalf of the appellant in this court with regard to the above question. It is argued in the first instance that compensation payable to the assessee under the Bihar Land Reforms Act does not constitute an asset as can be taken into account in computing the total wealth of the assessee. In the alternative, it is urged that in computing the value of compensation the Tribunal should have taken the value to be 50 per cent. and not 65 per cent. of the amount of compensation. None of these contentions, in our opinion, is well-founded. The Bihar Land Reforms Act, 1950 (Bihar Act 3 of 1950), provides for the transference to the State of the interest of proprietors and tenure-holders in land and of other interests in land. According to section 3(1) of the Act, the State Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation under sub-section (2) of section 32 of the Act. Perusal of the different provisions of the Bihar Land Reforms Act shows that as soon as the estate or tenure of a proprietor or a tenure-holder vests in the State, he becomes entitled to receive compensation. The fact that the payment of compensation in terms of the provisions of the Act may be deferred and be spread over a number of years does not affect the right of the proprietor or tenure-holder to the compensation. The assessee, in our opinion, was vested with a right to get compensation immediately his land was vested in the State. Section 2(e) of the Act defines "assets" to include property of every description, movable or immovable, but does not include certain categories of property with which we are not concerned. The word "property", as mentioned by this court in the case of Ahmed G. H. Ariff v. Commissioner of Wealth-tax is a term of the widest import and, subject to any limitation which the context may require, it signifies every possible interest which a person can clearly hold and enjoy. The definition of the "assets" as given in section 2(e) of the Act, though not exhaustive, shows its wide amplitude a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the amount of compensation had not been determined by the valuation date. Assuming for the sake of argument that the amount of compensation payable to the assessee had not been determined by the Compensation Officer by the valuation date, that fact would not justify the exclusion of the compensation payable from the assets of the assessee. The right to receive compensation became vested in the assessee the moment he was divested of his estate and the same got vested in the State in pursuance of the provisions of the Bihar Land Reforms Act. As the estate of the assessee which vested in the State was known and as the formula fixing the amount of compensation was prescribed by the statute, the amount of compensation was to all intents and purposes a matter of calculation. The fact that the necessary calculation had not been made and the amount of compensation had consequently not been qualified by the valuation date would not take compensation payable to the assessee out of the definition of assets or make it cease to be property. The right to receive compensation from the State is a valuable right, more so when it is based upon statute and the liability to pay is not denied by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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